Its very hard to show a problem customer the door and say “goodbye.” Its also very hard to say “no thank you” to new business. However, just like problem employees, problem customers can have an insidious impact on cash flow, staff morale and even overall customer satisfaction. This is a representative discussion topic in the CEO Masters Forum.
High maintenance customers. Low margin customers. Slow paying customers. Abusive customers. Customers that cause us to stray from our core strategy and values. Customers that buy below our established minimum orders. Customers that pick off our employees. Customers that constantly switch between us and our competitors. Some customers score high on many of these. They may be the nicest people in the world. However, their negatives far outweigh their positives. They are like a fungus on the health of our enterprise. There are numerous case studies that show the consequences. Although revenues grow, company margins shrink, working capital needs disproportionately increase, inventory needs unnecessarily increase, employee turnover goes up, customer satisfaction goes down, business complexity increases, and the company drifts away from its winning strategy.
A good place to start the process of eradicating problem customers (or customers that simply “don’t fit”) is prior to on-boarding them. Be intentional. Work with your team to develop a checklist of what a great customer looks like and have them stick to it when hunting for new business or screening new client prospects. It specifies customer characteristics that will drive long-term value to your organization. Your team can help a prospective customer that doesn’t “fit” by having a list of possible company’s that could help them.
Have your team apply the same checklist to current customers and encourage them to be intentional about their action plans for each identified problem customer. Like all problems, many customer issues can be repaired but in certain cases, it is best to say “no thank you.” More sophisticated systems can be developed for standardized and statistical client scoring that provides an overall view of customer quality utilizing your ERP / CRM systems.
Successfully managing the exit process for a client is vital. Should all problem customers be shown the door? Our CEO Members would suggest no. But it is sage to be proactive and conscious about the management of your customer “quality.”
From a leadership perspective, consider a periodic review of your ideal customer checklist content as well as ongoing analysis of how well your company is performing in attracting and retaining the customers you really want.
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